Core Viewpoint - The company, ZhiZi City Technology, is expected to see significant revenue and profit growth in the first half of 2025, driven by strong performance in its social business and innovative products, particularly in the AI-driven sector [1][2][3]. Group 1: Financial Performance - Total revenue for the first half of 2025 is projected to be between RMB 31.35 billion and RMB 32.15 billion, representing a year-on-year growth of 38.0% to 41.5% [1]. - Net profit attributable to shareholders is expected to be around RMB 4.70 billion to RMB 5.10 billion, showing a substantial increase of 108.9% to 126.7% year-on-year [1]. - Adjusted EBITDA is anticipated to be approximately RMB 6.30 billion to RMB 6.70 billion, reflecting a growth of about 40.6% to 49.6% [1]. Group 2: Social Business Growth - The social business is expected to generate revenue between RMB 28.00 billion and RMB 28.60 billion, with a year-on-year increase of 35.4% to 38.3% [2]. - Key contributors to this growth include strong performance from new products SUGO and TopTop, with SUGO ranking 7th in revenue among social network apps in the Middle East [2]. - The company is enhancing its market presence globally, with SUGO showing promising adaptability in new markets such as Latin America and Europe [2]. Group 3: Innovative Business Development - Innovative business is projected to achieve explosive growth, with expected revenue between RMB 3.35 billion and RMB 3.55 billion, marking a year-on-year increase of 65.0% to 74.9% [3]. - The success is attributed to stable development in traffic monetization and social e-commerce, alongside the gradual revenue contribution from premium games [3]. - The company is focusing on shortening game development cycles and improving operational efficiency, which is expected to drive stronger growth in this segment [3].

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected stock price increase of over 15% relative to the industry index in the next six months [4][15]. Core Insights - The company's social business is projected to achieve revenue of RMB 28.00-28.60 billion in 25H1, reflecting a year-on-year growth of 35.4%-38.3%, driven by strong performance from new products SUGO and TopTop [2]. - The innovative business segment is expected to see explosive growth, with anticipated revenue of RMB 3.35-3.55 billion, representing a year-on-year increase of 65.0%-74.9% [3]. - The company is expected to achieve revenues of RMB 69.81 billion, RMB 86.49 billion, and RMB 103.58 billion for the years 2025, 2026, and 2027 respectively, with corresponding net profits of RMB 9.51 billion, RMB 12.26 billion, and RMB 15.30 billion [3]. Financial Summary - For the fiscal year 2023, the company reported total revenue of RMB 3,308 million, with a year-on-year growth rate of 18.1% [1]. - The projected net profit for 2023 is RMB 513 million, showing a significant year-on-year increase of 294.1% [1]. - The company's return on equity (ROE) for 2023 is reported at 45.8%, with a projected decline to 31.2% in 2024 [1][8]. Revenue and Profit Forecast - The company anticipates a revenue increase to RMB 5,092 million in 2024, with a growth rate of 53.9% [1]. - By 2025, the expected revenue is RMB 6,981 million, with a growth rate of 37.1% [1]. - The projected earnings per share (EPS) for 2025 is RMB 0.67, with a price-to-earnings (P/E) ratio of 13.9 [1][8]. Market Position and Strategy - The company is focusing on enhancing AI capabilities and diversifying its product offerings to cover more segments in the global social entertainment market [3]. - The SUGO product has shown good market adaptability in new regions such as Latin America and Europe [2]. - The company aims to solidify its position in core markets while expanding its global footprint [2].

Investment Rating - The investment rating for the company is "Buy" based on its strong performance and growth potential [10]. Core Insights - The company achieved a revenue of 5.09 billion RMB in 2024, representing a year-on-year growth of 53.92%. The social business revenue reached 4.63 billion RMB, growing by 58.1%, while the innovative business revenue was 460 million RMB, up by 21.3% [1][2]. - The operating profit was 729 million RMB, an increase of 32.3%, and the adjusted EBITDA was 963 million RMB, reflecting a growth of 42.8% [1]. - The company expects to record a revenue of approximately 1.5 to 1.57 billion RMB in Q1 2025, which is a year-on-year increase of about 41.5% to 48.1% [2]. Summary by Sections Social Business Performance - The social business continues to show robust growth, with a revenue of 4.63 billion RMB in 2024, up 58.1%. Key products like MICO and YoHo are contributing significantly, while the new product SUGO has seen revenue growth exceeding 200% [3]. - The average monthly active users (MAU) for the social business reached 32.835 million in Q1 2025, a quarter-on-quarter increase of 3.4% [3]. Innovative Business Development - The innovative business, particularly in premium games, has shown significant growth, with total revenue exceeding 705 million RMB, a year-on-year increase of over 80%. The flagship game "Alice's Dream: Merge Games" has also performed well [3]. - The social e-commerce segment has experienced revenue growth exceeding 200% and profit growth over 600% [3]. Profit Forecast - The company is expected to maintain high growth in its social and gaming products, with new products in development. The acquisition of remaining shares in NBT Social Networking is anticipated to further enhance profits in 2025 [5]. - The projected net profits for 2025-2027 are 903 million, 1.12 billion, and 1.38 billion RMB, representing year-on-year growth rates of 88.1%, 23.9%, and 23.3% respectively [5].

Core Viewpoint - CITIC Securities has initiated coverage on Zhizi City Technology (09911.HK) with a "Buy" rating, highlighting its strong growth potential in the global pan-entertainment social sector, driven by its "product replication + country replication" strategy and extensive overseas operational experience [1] Group 1: Company Performance - Zhizi City Technology has shown robust performance in recent years, entering a "product harvest period" with a clear business structure and synergistic growth across its three main business segments [1] - The company has a healthy product ladder in its pan-crowd social business, with flagship products MICO and YoHo generating cash flow, while newer products TopTop and SUGO are expected to see revenue growth exceeding 100% and 200% respectively in 2024 [2] - The company is projected to achieve approximately 50% year-on-year revenue growth for "TopTop + SUGO" in 2025, leveraging its replicable experience to develop star products [2] Group 2: Market Expansion - Zhizi City Technology is accelerating its expansion in overseas markets, particularly through its global multi-crowd social platform HeeSay, which has significant growth potential [2] - The company is also diversifying its growth avenues by developing mobile games and social e-commerce, with the casual gaming sector being a strategic focus [2] - The Middle East and North Africa (MENA) region presents a vast market opportunity for online social entertainment due to high GDP per capita and limited offline social options, with the media and entertainment market projected to reach $82 billion by 2032 [2]